Green steel transition in focus: Key takeaways from EUROMETAL Steel Day in Zurich
Demand for green steel to rise swiftly in 5-10 years, supply to remain tight
Demand for green flat steel is expected to increase to around 49 million tonnes in 2030, Guido Kerkhoff, chief executive officer at Klöckner & Co SE said during his presentation, quoting BCG data.
Over 45 million tonnes of new green steelmaking capacities — via electric-arc furnace (EAF) or EAF-DRI (direct-reduced iron) production — are expected to come online in Europe in 2025-2030, however, a delay of about 15 million tonnes in capacity expansion in expected until 2030.
“Customers’ willingness to pay makes the difference in tight markets,” Kerkhoff said.
Industry sources estimated that green steel volumes traded in Europe were below 100,000 tonnes in 2023, with most estimations coming at around 50,000-70,000 tonnes.
Very few suppliers were able to offer “physically-produced green steel, with emissions proved by Environmental Product Declarations [EDPs] below 1 tonne of CO2 per 1 tonne of steel [for Scope 1,2,3],” according to one distributor.
“One can reach net-zero [emissions] with [carbon] offsets, but some buyers refuse to deal with such steel, claiming it has been ‘green-washed’,” a second distributor said.
Premiums for EAF-produced green steel with emissions for Scope 1,2 and 3 carbon emissions below 0.8 tonnes per 1 tonne of steel were reported at €200-350 ($217-381) per tonne in the week to Friday May 17.
Buyer sources estimated tradeable values for such steel at €100-150 per tonne.
Fastmarkets’ weekly assessment of the green steel domestic, flat-rolled, differential to HRC index, exw Northern Europe was €150-250 per tonne on Thursday, stable week on week.
Transparency is a decisive criteria in green steel sourcing
In the past several year, European steel producers have accelerated their decarbonization efforts, and the new market for steel with a reduced carbon footprint has emerged.
Major suppliers are offering their own green steel brands with lower carbon footprint — XCarb, Arvzero, SSAB Zero, Bluemint, Greentec, etc. — however, there is no common standard for green steel in the industry yet.
“Product Carbon Footprint (PCF) is the only criterion for comparability in order to meet growing customer demand for transparency along the entire values chain,” Kerkhoff said.
“We need a coordinated approach from the entire sector, a simple approach that is applicable to all members,” Andreas Steffes, executive manger at Handel Schweiz, said during his presentation.
PCF Declaration is set to create transparency on emissions in the supply chain, tracking emission under Scope 1 and 2 (direct emissions generated by an entity or its subsidiaries and indirect emissions from energy used by an organization) and upstream Scope 3 (indirect emissions that occur from sources beyond a company’s control) as well.
“With a PCF declaration, no more emission estimates are required from customer side… [PCF declarations] include emissions from raw material extraction to [the material’s] arrival at the customer’s factory gate,” Kerkhoff added.
Customers become more demanding
Customers’ requirement for carbon footprint in steel products are “steadily increasing.”
For example, automaker BMW aims to be climate-neutral no later than 2050, with the share of recycled content in their products set at a minimum 95% and the approach “use EAF steel whenever possible,” Stefan Feichtinger, senior manager ESG corporate technology at Swiss Steel Group, said during the meeting.
For Volvo, the goal is to have 25% recycled and bio-based content in the new car models by 2025 and 35% by 2030.
Currently, 40% of European steel is produced from scrap (EAF-route), with a steel footprint of around 700 kg CO2 per tonne. Mainly long steel products are being produced via such route.
Around only about 1% comes from from DRI-EAF (1.3-1.4 tonnes of CO2 footprint) while the rest of steel is produced by conventional blast furnace-basic-oxygen furnaces (BF-BOF) (2-2.3 tonnes of CO2 content), and the majority of flat steel products are produced via BF-BOF.
Fastmarkets has recently launched consultations to lower the threshold for the carbon emissions content for its weekly green steel premium and daily inferred green steel price in Europe, to lower the upper threshold for both assessments, following feedback from the market.
Fastmarkets proposes to change the maximum carbon emission content to 800 kilograms per 1 tonne of steel, down from 1 tonne previously.
Raw material supply challenges
The gradual shift from conventional BF-BOF route to either EAF or EAF-DRI poses many challenges for the steel sector.
DRI-EAF route requires high-quality iron ore, with a high Fe percentage and low impurities, and less than 5% of global iron ore supply is suitable for production, Stefan Feichtinger said, quoting iron ore supplier BHP.
The solutions could be:
- Development of mines
- Further processing of existing ores to improve the grade
- Technological solutions: DRI-ESF-(electric-smelting furnace)-BOF, fluidized bed reduction that allows for lower grade ores
Another big challenge could be increased demand for scrap to feed new EAF capacities. To feed new flat steelmaking capacities, companies would need to buy high-quality scrap grades with lower impurities that are suitable for flat steel production.
EU is the largest net scrap exporter in the world. Scrap export volumes from the bloc were 18.5 million tonnes in 2023, a 7% increase vs 17.4 million tonnes a year before.
Starting in 2025, the export of ferrous and non-ferrous metal scrap to non-Organization for Economic Co-operation and Developed (OECD) countries will require consent by obtaining formal approval from non-OECD countries to export ferrous and non-ferrous scrap. These recipient countries must also demonstrate their ability to manage the scrap effectively, ensuring responsible handling and recycling.
This change could transform the EU from a net scrap exporter to an importer within five years.
Steel is not part of the problem, but part of the solution
Steelmaking generates approximately 8% of the worldwide carbon emissions, according to the World Steel Association.
However, the carbon footprint of steelmaking is still lower compared with other industries — such as carbon fiber with around 20 tonnes CO2 per 1 tonne of carbon fiber, and aluminium, with 5-8 tonnes of CO2 per 1 tonne.
In addition, steel is a recyclable product and remains in the material’s cycle.
With modern technologies, environmentally friendly “green” steel can be produced and used by different industries. The use of green steel only pushes up the price of the end-product marginally, Guido Kerkhoff said.
Notably, for the automotive industry, the use of green steel products would only push the car price up by 0.3-0.7%, and by 1.7-3.6% for home appliances. For onshore and offshore wind towers, the costs would rise by 1.6-3.4% and by 2.6-5.5% respectively.
“Steel is part of the solution [in decarbonization journey] and contributes significantly to the decarbonization of the value chain in many industries,” Guido Kerkhoff said.
ArcelorMittal calls for internationally competitive prices for renewable energies, hydrogen
Steelmaker ArcelorMittal has called for guaranteed internationally competitive prices for renewable energies and hydrogen in sufficient quantities in the long term for Germany to successfully transition to carbon-neutral steel production.
The steelmaker May 17 called for a clear industrial policy, saying that the necessary economic policy framework needed to be put in place more quickly by Germany and the EU.
“Despite significant progress and an EU-approved funding commitment from the German government for the planned decarbonization projects at the flat steel sites in Bremen and Eisenhuttenstadt, the company is facing challenges, particularly due to high energy and hydrogen costs,” it said, adding that competitive energy prices were a significant factor in its final investment decision to decarbonize production in Germany.
ArcelorMittal said CO2-neutral pig iron production required a hydrogen price of around Eur2/kg to remain competitive, but hydrogen prices were Eur7-9/kg. It said it was also difficult to operate EAFs economically in the long term due to high electricity prices.
Platts, part of S&P Global Commodity Insights, assessed the cost of green hydrogen production via alkaline electrolysis in Germany, backed by renewable power purchase agreements, at Eur6.58/kg ($7.13/kg) on May 16, down from Eur7.77/kg a month before.
The assessment reflects one possible pathway for producing EU Renewable Energy Directive-compliant green hydrogen.
The recent debut auction under the EU’s European Hydrogen Bank, providing subsidy support for green hydrogen production, cleared at below 50 euro cent/kg, with seven projects totaling 1.5 GW in Iberia and the Nordics the winners.
The winning bids demonstrated both the competitive locations for green power production, along with a willingness of end users to pay a premium for the renewable hydrogen.
There were also several bids from projects in Germany for well under Eur1.50/kg, EC data showed.
Carbon neutral by 2050
ArcelorMittal aims to reduce its CO2 emissions in Europe by 35% by 2030 and reach carbon-neutral production globally by 2050.
In Germany, the company is converting its blast furnace technology to natural gas to reduce emissions and plans to eventually move to hydrogen-based direct reduction and electric arc furnaces.
In February, the German government announced Eur1.3 billion support ArcelorMittal’s plan to build EAFs in Bremen and Eisenhuttenstadt, as well as a direct reduction plant in Bremen.
The steelmaker said at the time the use of green hydrogen could result in savings of more than 6.3 million mt/year of CO2 by 2030 and produce 3.4 million mt of CO2-reduced steel in both plants.
“Decarbonizing our production is a top priority for us, but the current costs and future price forecasts for energy and hydrogen pose a considerable challenge,” ArcelorMittal Germany CEO of the flat steel plants in Bremen and Eisenhuttenstadt Thomas Bunger said in the statement.
“An industrial policy aimed at reducing these costs is crucial for our success and the success of the entire industry,” he said.
“We need the rapid expansion of renewable energies and the development of domestic hydrogen production while at the same time increasing hydrogen imports in order for the transformation to succeed,” ArcelorMittal Europe Vice President Lutz Bandusch said.
The steelmaker said establishing a “green lead market” was crucial to the viability of producing CO2-reduced steel competitively, while labeling initiatives could also be helpful to set additional incentives, such as in public tenders and government procurement.
ArcelorMittal also called for “decisive action” at national and EU levels against distortions of competition, which it said would include closing the remaining weaknesses in Carbon Border Adjustment Mechanism to reduce the risk of part of the industrial value chain migrating outside Europe.
“ArcelorMittal remains firmly committed to achieving CO2-neutral production worldwide by 2050. Active support through government measures is essential for the transition to a sustainable future,” it said.
ArcelorMittal produces CO2-reduced steel under its XCarb brand and subscribes to the ResponsibleSteel standard, which guarantees socially and environmentally responsible supply chains and production methods, it said.
Platts, part of S&P Global Commodity Insights, assessed domestic HRC prices in Northern Europe at Eur630/mt ex-works Ruhr May 16, down 8.7% since the start of 2024.
Authors: Jacqueline Holman, jacqueline.holman@spglobal.com, James Burgess, james.burgess@spglobal.com
Clean, lean US steel sector hunts for green steel premium
By global standards, US steel is already pretty green — and pretty pricey.
The American Iron and Steel Institute credits EAFs in its most recent industry profile with about 71% of US domestic steel production, compared with a 26% global average.
A round-up of estimated greenhouse gas emissions from the top four US steelmakers — Cleveland-Cliffs, Nucor, Steel Dynamics Inc and US Steel — from each company’s most recent sustainability report show a range of about 1.98 tonnes of carbon dioxide equivalent (CO2e) per 1 tonne of steel down to as low as 0.39 tonnes C02e per 1 tonne of steel, covering Scope 1 and 2 emissions, which are direct emissions generated by an entity or its subsidiaries and indirect emissions from energy used by an organization.
Scope 3 emissions are a little harder to pin down due varying definitions – most producers lump them in with raw material costs rather than assume the carbon emissions of heavy end-use emitters like automobiles.
Even there, however, at least one major producer – Steel Dynamics Inc – puts its Scope 1, 2 and 3 average emissions as low as 0.78 tonnes CO2e per 1 tonne of steel. The same sustainability report puts the global average around 1.91 tonnes CO2e per 1 tonne of steel, with the global blast furnace average at 2.33 C02e per 1 tonne of steel.
That cleanliness comes at a cost. Though environmental concerns are just one piece of the US price puzzle, they are partially reflected in the disparity between US, European and Asian prices.
Fastmarkets’ daily steel hot-rolled coil index, fob mill US Midwest was last calculated at $38.97 per cwt ($779.40 per short ton) on Wednesday May 15. This is against a backdrop of sideways-to-stagnant prices.
In contrast, Fastmarkets calculated its daily steel hot-rolled coil index, domestic, exw Northern Europe at €641.83 per tonne ($632.91 per short ton) on Thursday May 16.
Likewise, Fastmarkets’ weekly price assessment for steel HRC import, cfr Vietnam was $550-555 per tonne ($498.95-508.02 per short ton) on May 10.
Fastmarkets currently publishes green steel differentials for these European and Asian HRC assessments. The European green differential works out to $147.92-246.53 per short ton, while the Asian differential works out to $185.07-308.44 per short ton.
In a simplistic and possibly coincidental view, the European HRC price subtracted from the US HRC price is roughly the value of the European green steel differential.
When all steel is green, none is
It’s tempting to say that buying US HRC in general is buying green steel, but the industry can’t be complacent if it wants to retain or grow that premium, according to Greenway Steel founder Randy Charles.
“US-produced steel does represent global leading low emissions — for now,” he told Fastmarkets. “That will change rapidly in the EU given the incentive behind the ETS [Emissions Trading System] and carbon liability, as well as investments being made in new H2 technology.”
Earlier this year, one steel mill executive told Fastmarkets that they wouldn’t be surprised if carbon emissions ultimately become another tool in the US’ protectionist toolbox, similar to the Carbon Border Adjustment Mechanism in place in the EU.
Such a move would have bipartisan appeal, regardless of the victor in the US presidential election in November, the executive said. It would echo the 232 national security restrictions originally put in place by President Donald Trump — and maintained by President Joe Biden — and it would mollify environmental advocates and industrial concerns alike, as the US already has a leg-up on the green steel front.
In that scenario, a prospective US green steel differential may actually go negative, as the carbon costs for higher-emission steel add up; it may be cheaper to buy green.
A second executive likened the push for green steel to the bounty some states place on mercury switches, a once-common and toxic component of older cars being sent to the scrapyard.
Some states paid a bounty per switch, incentivizing their removal. Some states still do. And some moved to a voluntary system that did away with bounties entirely, putting the cost of removal and reporting on the scrapyard.
A carbon tax on steel would harm incentives to go green in search of higher profit and make it just another cost of doing business — a boon to a burden in just a few years, he said.
Ultimately, green steel will come in two primary shades, worldwide, Charles said — relative and absolute.
“The absolute basis, and lowest footprint, will carry the highest premiums for end users wanting, or even needing, to decarbonize supply chains.”
Published by: Dan Hilliard